FI Supervision 4: Survey of Funds of Funds

2019-01-15 | Reports Consumer Markets

FI has surveyed 25 funds of funds managed by 25 fund management companies and AIF managers. FI has scrutinised how the consumer is informed about fees and how the managers have reported their funds of funds’ objectives and performance.

The managers have been asked whether they invest their funds of funds' capital in their own funds and about the reasons for doing so. FI has not studied how the funds of funds are actually managed.

The survey indicates that the fees charged for funds of funds are generally high, especially when compared with index funds and Swedish equity funds. The information provided about the total fees applicable to funds of funds is sometimes unclear. Close to half of the funds of funds surveyed do not utilise a benchmark index, which makes it more difficult for the consumer to evaluate these products' rate of return targets.

The majority of managers invest their funds of funds' capital in their own funds. The reason for doing so is said to be discounts obtained in underlying funds. Despite these discounts, the total fees are high. Investing in the manager's own funds presumes the manager dealing with their conflicts of interest.

In light of these observations, FI concludes that there is room for improvement if managers are to ensure that they always act in the best interest of unit holders.

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